The Right Honourable George Osborne
11 Downing Street
14th March 2016
Budget 2016 – Some Important Additions Needed For Your Budget
Those currently aged 20 – 35 have never had it so hard; forced to pay for further education, increasing travel, living costs and unfairness in taxes like Insurance Premium Tax are conspiring to reduce their disposable income. Once you factor in mandatory pension contributions and a reduction in State Pensions – you’ll see that a generation is being forced to pay the price for a system that they are unlikely to benefit from in the same way their parents and grandparents have.
Substantial wealth has being built up and held by these baby boomers and this is causing a considerable amount of financial and emotional pain for the grandchildren and great grandchildren of these boomers.
I urge you to consider at least some of these points in your Budget or at least think about making changes, ready for the Autumn Statement.
- House Prices And Availability
- Fairness In Taxation
- Fairness For Young Families
There is currently a clear shortage of homes to rent and to purchase. Much of what has been introduced in recent years has left supply and building of homes in the firm control of developers that are not building enough.
It is also clear that we have to build mixed housing for rental and sale. It is possible to build houses very cheaply without a commercial developer involved which means the total cost for a for two bed flat could be as low as £80,000 plus the price of the land.
It is possible for these rentals to be built using Government money initially, and then sold off as crowdfunded investments once complete. With rental yields of 4% (easily achievable) these would be a very attractive investment for pension and Individual Savings Accounts (ISA) where there is a lot of money tied up doing nothing for the population at large.
By using a larger quantity of apprentice labour, build costs will be reduced and skills will be improved. Local councils have large tracts of land that could be used for this kind of build, and with the latest in prefabricated building technology these buildings go up in months.
The net cost to the UK government will be small.
Those not living in Social Housing should also be given the same treatment as those that qualify for the ‘Right To Buy’. This could be a simple one off grant made on the purchase of a first home, limited to £103,900 in London. Council/Social housing were all built with taxpayers money so it seems fair that all taxpayers are treated equally.
Fair Tax Treatment For Those Renting
There are more and more people renting, more so now than ever. Yet there are obvious tax benefits to owning your own home.
Private Residence Relief (PRR) allows couples and individuals to benefit from the gain in value of their main home without any tax burden on sale. These gains are worth many thousands of pounds to those selling property, there is no income or capital gains tax payable on these proceeds.
Tax Relief On Rent
Making things equal would mean that basic and higher rate tax relief on rent paid should be allowed, in the same way as buy to let investors were always treated and to balance out the PRR, making home renting as fair as buying.
One way of funding this could be to restrict rather than end Private Residence Relief.
Growing Family Individual Savings Accounts (FISA)
Childcare costs are prohibitive and historically increase higher than wages.
Focusing on young families and providing some help to them via a FISA, these will allow young couples to invest in their future family.
A FISA will allow an investment along similar rules as the current ISA’s, with a couple of important differences. It will allow tax relief on the investments at the couple’s marginal rate in the same way as pension contributions are made now.
The proceeds of the fund built up could be used to:-
- Fund childcare from the gross fund saved.
- Held as conventional ISA – proceeds taxed at marginal rates of tax
- Fund pension contributions – funds transferred to a pension as a gross contribution
Young families need help in this area, and this would encourage long term savings and provide a reasonable tax break to those who still need to work.
Obviously you may want to make some tweaks before implementing some or all of these things, please don’t hesitate to get in touch if you need some real world and practical help.
0774 007 6226